Financial sector contractors hit again as Barclays announces job cuts

Friday 9 May 2014

Contractors in the financial sector are taking what feels like hit after hit at the moment and the news coming out of Barclays has done little to allay fears.

It has been revealed that the bank intends to cut 19,000 jobs by 2016, with 9,000 of these occurring in the UK. The investment arm of the organisation alone will account for 7,000 of total job losses.

While Barclays claims this is part of a new strategy to create a "sustainable return on equity above the cost of equity in a changed regulatory and economic environment", it will be another blow for contractors in the financial sector.

The PCG has recently warned that the industry could become a no-go area for the self-employed if rate and job cuts continue. This will cause a skills exodus in an already struggling industry.

Chris Bryce, PCG chief executive officer,said: "The finance industry does not operate in its own little bubble. Rates for skilled IT professionals are set by the wider market and non-targeted, blanket reductions are more likely to lead to a skills exodus than a cost saving.

"We’ve already seen this happen in other industries - such as the public sector – when clients have tried to impose changes to contracts. Those with the best experience, skills and talent simply move elsewhere."

Barclays has already declared that it will be cutting contractor rates for the third time in as many years, giving freelancers a "take it or leave it" ultimatum.

Experts claim this could leave the bank in hot water, as they will struggle to find like-for-like replacements. This will cause the erosion of technical abilities.

A better understanding of the current talent dynamic may be needed on behalf of financial institutions and a respect for the value of contractors.

Indeed, temporary workers are experienced, flexible resources that can help businesses manage projects and grow in the current environment.

Mr Bryce believes a best practice approach needs to be created for taking on contractors to help banks get the most out of them.

"The organisations that use them best operate constant evaluation of the projects they are involved in coupled with proper analysis of the ROI they provide," he said.

In the instance of Barclays, for example, contractors could play an important role in helping with restructuring. Indeed, the bank is looking to create four core businesses: Personal Corporate Banking, Barclaycard, Africa Banking and the Investment Bank.

Barclays will also create Barclays Non-Core - a grouping of assets that do not fit in with strategic objectives or returns criteria underlined in its strategic review. Over time, the bank will either exit or run-down these assets, which consist of around £115 billion risk weighted assets. These have an associated leverage exposure of circa £400 billion.

"As a consequence of these changes, Barclays will become significantly more balanced and in turn able to deliver higher, more sustainable returns through the cycle," the bank explained in a statement.

By Victoria McDonnell

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